Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Debt
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Solvency Ratios (Summary)
Time Warner Inc., solvency ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Debt Ratios | ||||||
| Debt to equity | ||||||
| Debt to capital | ||||||
| Debt to assets | ||||||
| Financial leverage | ||||||
| Coverage Ratios | ||||||
| Interest coverage | ||||||
| Fixed charge coverage | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
- Debt to Equity Ratio
- The debt to equity ratio demonstrated a general increase from 0.67 in 2013 to a peak of 1.01 in 2015, indicating a rising reliance on debt relative to shareholders' equity during this period. It stabilized around 1.00 in 2016, before declining to 0.84 in 2017, suggesting a reduction in leverage and improved capital structure stability towards the end of the timeframe.
- Debt to Capital Ratio
- This ratio showed an upward trend from 0.40 in 2013 to 0.50 in both 2015 and 2016, reflecting a growing proportion of debt in the overall capital employed. However, it slightly decreased to 0.46 in 2017, aligning with the observed reduction in the debt to equity ratio and indicating a cautious approach in the use of debt financing in the latest year.
- Debt to Assets Ratio
- The debt to assets ratio rose steadily from 0.30 in 2013 to 0.37 in 2015 and 2016, highlighting increased debt relative to the company's asset base. It then decreased to 0.34 in 2017, suggesting an improvement in asset coverage relative to debt or a decrease in debt levels.
- Financial Leverage
- Financial leverage showed a consistent increase from 2.27 in 2013 up to 2.71 in 2016, indicating greater use of debt to finance assets. This was followed by a decline to 2.44 in 2017, which aligns with the reduction in debt ratios and may reflect a strategic move toward reducing financial risk.
- Interest Coverage Ratio
- Interest coverage fluctuated over the period, starting at 5.13 in 2013, decreasing to 4.46 in 2014, then recovering to 4.94 in 2015 and 4.74 in 2016. A notable increase to 5.90 was observed in 2017, indicating enhanced ability to meet interest obligations, possibly due to improved earnings or reduced interest expenses.
- Fixed Charge Coverage Ratio
- The fixed charge coverage ratio moved in a pattern similar to interest coverage, declining from 4.04 in 2013 to 3.68 in 2014, then improving to 4.15 in 2015 and slightly decreasing to 4.02 in 2016. A subsequent rise to 4.81 in 2017 reflects a stronger capacity to cover fixed financial charges, further supporting the indication of improved financial health in the most recent year.
Debt Ratios
Coverage Ratios
Debt to Equity
Time Warner Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | ||||||
| Long-term debt, excluding due within one year | ||||||
| Total debt | ||||||
| Total Time Warner Inc. shareholders’ equity | ||||||
| Solvency Ratio | ||||||
| Debt to equity1 | ||||||
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to equity = Total debt ÷ Total Time Warner Inc. shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
-
The total debt showed a consistent upward trend from 2013 to 2016, increasing from 20,165 million US dollars to 24,339 million US dollars. In 2017, there was a slight decrease to 23,744 million US dollars. Overall, debt increased by approximately 17.7% over the five-year period, indicating a rise in financial leverage initially, followed by a small reduction toward the end of the timeframe.
- Total Shareholders’ Equity
-
Shareholders’ equity experienced a decline from 29,904 million US dollars in 2013 to 23,619 million US dollars in 2015. Subsequently, equity values showed recovery, rising to 24,335 million US dollars in 2016 and achieving 28,375 million US dollars by the end of 2017. This reflects a drop in equity during the initial period, which was partially reversed later, ending with a net decrease of about 5% relative to the starting point.
- Debt to Equity Ratio
-
The debt to equity ratio increased markedly from 0.67 in 2013 to a peak of 1.01 in 2015, indicating growing reliance on debt financing relative to equity over this period. It remained at 1.00 in 2016 and then decreased to 0.84 in 2017. This pattern suggests increasing financial leverage in the earlier years, followed by a moderation in leverage in the final year, reflecting the changes observed in both total debt and shareholders' equity.
- Summary Insights
-
Over the five-year period, the company increased its debt levels while experiencing fluctuations in equity, with a reduction followed by recovery. The initial increase in the debt to equity ratio above 1 indicated higher financial risk due to greater dependence on debt. The subsequent decline in the ratio in 2017 suggests a strategic move to improve the capital structure by either reducing debt, increasing equity, or both, thereby potentially lowering financial risk and improving balance sheet stability.
Debt to Capital
Time Warner Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | ||||||
| Long-term debt, excluding due within one year | ||||||
| Total debt | ||||||
| Total Time Warner Inc. shareholders’ equity | ||||||
| Total capital | ||||||
| Solvency Ratio | ||||||
| Debt to capital1 | ||||||
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt increased steadily from 20,165 million US dollars in 2013 to a peak of 24,494 million US dollars in 2014, continuing to rise to 23,792 million US dollars in 2015 and reaching 24,339 million US dollars in 2016. In 2017, there was a slight decrease to 23,744 million US dollars, indicating a minor reduction after several years of growth.
- Total Capital
- Total capital exhibited a declining trend from 50,069 million US dollars in 2013 to 46,970 million US dollars in 2014. It then showed a modest recovery, increasing slightly to 47,411 million US dollars in 2015 and continuing to grow to 48,674 million US dollars in 2016. In 2017, there was a more pronounced increase to 52,119 million US dollars, surpassing the initial 2013 level.
- Debt to Capital Ratio
- The debt to capital ratio rose notably from 0.40 in 2013 to 0.48 in 2014, indicating a higher proportion of debt relative to capital. It continued to increase to 0.50 in both 2015 and 2016, reflecting a stable but elevated leverage position. In 2017, the ratio decreased to 0.46, suggesting some improvement in the capital structure with a reduced reliance on debt relative to total capital.
Debt to Assets
Time Warner Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Debt due within one year | ||||||
| Long-term debt, excluding due within one year | ||||||
| Total debt | ||||||
| Total assets | ||||||
| Solvency Ratio | ||||||
| Debt to assets1 | ||||||
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt increased steadily from 20,165 million US dollars in 2013 to a peak of 24,494 million US dollars in 2014, then continued to rise moderately until 2016, reaching 24,339 million US dollars. However, in 2017, total debt slightly decreased to 23,744 million US dollars, indicating a possible effort to reduce liabilities or optimize capital structure.
- Total Assets
- Total assets displayed a declining trend from 67,994 million US dollars in 2013 to 63,259 million in 2014. From 2014 onwards, assets showed a gradual recovery and growth, reaching 69,209 million US dollars by the end of 2017. This suggests that after an initial decline, the company improved its asset base over the latter years.
- Debt to Assets Ratio
- The debt to assets ratio rose from 0.3 in 2013 to a higher level of 0.37 in both 2015 and 2016, reflecting increased leverage. In 2017, the ratio decreased to 0.34, which aligns with the slight reduction in total debt and increase in total assets during the same period. Overall, the company increased its leverage until 2016 but then took steps to improve its solvency position in 2017.
Financial Leverage
Time Warner Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | ||||||
| Total Time Warner Inc. shareholders’ equity | ||||||
| Solvency Ratio | ||||||
| Financial leverage1 | ||||||
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Financial leverage = Total assets ÷ Total Time Warner Inc. shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
- Total assets
- The total assets exhibited a declining trend from 67,994 million US dollars in 2013 to 63,259 million US dollars in 2014. Subsequently, there was a marginal increase in 2015 to 63,848 million US dollars, followed by a steady rise through 2016 and 2017, reaching 69,209 million US dollars. Overall, the asset base showed an initial contraction followed by a gradual expansion, indicating a potential recovery or growth phase in the latter years.
- Total Time Warner Inc. shareholders’ equity
- Shareholders’ equity declined significantly from 29,904 million US dollars in 2013 to 24,476 million US dollars in 2014, continuing to decrease to 23,619 million US dollars in 2015. A slight improvement occurred in 2016 to 24,335 million US dollars, with a more pronounced increase in 2017 reaching 28,375 million US dollars. This pattern suggests that after a period of equity erosion, the company began to rebuild its equity base toward the end of the period under review.
- Financial leverage
- Financial leverage rose from 2.27 in 2013 to a peak of 2.71 in 2016, reflecting an increasing reliance on debt relative to equity during this four-year span. In 2017, leverage decreased to 2.44, implying a reduction in debt levels or an increase in equity, contributing to a lower risk profile. The leverage trend aligns with the observed movements in shareholders’ equity and total assets, evidencing strategic adjustments in the capital structure over time.
Interest Coverage
Time Warner Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Time Warner Inc. shareholders | ||||||
| Add: Net income attributable to noncontrolling interest | ||||||
| Less: Discontinued operations, net of tax | ||||||
| Add: Income tax expense | ||||||
| Add: Interest expense | ||||||
| Earnings before interest and tax (EBIT) | ||||||
| Solvency Ratio | ||||||
| Interest coverage1 | ||||||
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Interest coverage = EBIT ÷ Interest expense
= ÷ =
2 Click competitor name to see calculations.
The financial data reveals fluctuations and developments in earnings before interest and tax (EBIT), interest expense, and interest coverage over the five-year period ending December 31, 2017.
- Earnings Before Interest and Tax (EBIT)
- The EBIT values initially declined from 6,586 million US dollars in 2013 to 6,032 million in 2014. This was followed by a recovery in 2015, with EBIT increasing to 6,828 million. However, 2016 saw a slight decrease to 6,583 million before rising again to the highest figure within the period, 7,159 million in 2017. Overall, EBIT demonstrated a generally positive trend after the initial dip, ending noticeably higher than the 2013 starting point.
- Interest Expense
- Interest expense showed a gradual increase from 1,283 million US dollars in 2013 to a peak of 1,388 million in 2016, reflecting a growing cost of debt or increased borrowings over these years. In 2017, this trend reversed slightly, with interest expenses declining to 1,214 million, which is the lowest amount in the assessed period, indicating potential debt repayments, refinancing, or a reduction in interest rates.
- Interest Coverage Ratio
- The interest coverage ratio trended downward from 5.13 in 2013 to 4.46 in 2014, signaling a reduced buffer to cover interest expenses initially. This ratio improved to 4.94 in 2015 but dipped marginally to 4.74 in 2016. A significant increase occurred in 2017, with the ratio reaching 5.9. The overall pattern suggests an initial tightening in the company's ability to cover its interest costs followed by a strengthening position, peaking above the starting level, likely due to the combined effects of increased EBIT and decreased interest expenses in the final year.
In summary, the company experienced volatility in its EBIT and interest expenses, but ended the period with improved operating earnings and reduced interest costs. The strengthened interest coverage ratio in 2017 points to enhanced financial stability and an increased capacity to meet interest obligations compared to earlier years.
Fixed Charge Coverage
Time Warner Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Time Warner Inc. shareholders | ||||||
| Add: Net income attributable to noncontrolling interest | ||||||
| Less: Discontinued operations, net of tax | ||||||
| Add: Income tax expense | ||||||
| Add: Interest expense | ||||||
| Earnings before interest and tax (EBIT) | ||||||
| Add: Rent expense, excluding sublease income | ||||||
| Earnings before fixed charges and tax | ||||||
| Interest expense | ||||||
| Rent expense, excluding sublease income | ||||||
| Fixed charges | ||||||
| Solvency Ratio | ||||||
| Fixed charge coverage1 | ||||||
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 2017 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= ÷ =
2 Click competitor name to see calculations.
The financial data indicates an overall positive trend in earnings before fixed charges and tax over the five-year period. There was a decline from 7049 million US dollars in 2013 to 6423 million US dollars in 2014, followed by a recovery and gradual increase to 7507 million US dollars by the end of 2017. This suggests a resilience and improvement in operational profitability after the initial dip.
Fixed charges remained relatively stable from 2013 to 2016, fluctuating narrowly between 1730 and 1746 million US dollars, before decreasing to 1562 million US dollars in 2017. This reduction in fixed charges in the final year contributes positively to the company's financial leverage and operating efficiency.
The fixed charge coverage ratio exhibits a similar pattern to earnings before fixed charges and tax, initially declining from 4.04 in 2013 to 3.68 in 2014, reflecting increased risk or reduced earnings relative to fixed charges. However, it subsequently improves to 4.81 by the end of 2017, the highest ratio in the reported period. This indicates enhanced ability to cover fixed charges through operational earnings, implying strengthened financial stability and reduced risk for creditors.
- Earnings before fixed charges and tax
- Decreased in 2014, followed by a steady increase through 2017, ending above the initial 2013 value.
- Fixed charges
- Maintained relatively constant levels from 2013 to 2016 with a notable decline in 2017.
- Fixed charge coverage ratio
- Declined in 2014 but improved consistently afterward, reaching its peak in 2017, indicating better coverage of fixed financial obligations.